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The recent ascent of renewable natural gas (RNG) in transportation is a direct antidote for the fact that low oil, diesel and gasoline prices have put a big stop sign in front of what just a couple of years ago was a growing market for natural gas in the truck fleet market, according to a senior executive with California-based Clean Energy Fuels Corp.

Given the depressed petroleum product prices, "there is not a tremendous amount of enthusiasm for alternative fuels when diesel and gasoline are as inexpensive as they are right now," said Harrison Clay, president of Clean Energy Renewables, which is pushing the new RNG technology.

Clay sees some further optimism in the otherwise depressed natural gas vehicle (NGV) space from the new near-zero emission NGV engines coming on the market and the federal renewable fuel standard (RFS) program that offers tradeable pollution-saving credits for fuels, such as RNG, and allocates volume goals for the production of cellulosic biofuel, biomass-based diesel, advanced biofuel and total renewable fuels.

"Having the RNG offering has been a growth opportunity for us," said Clay.

Clay does not shy away from the reality that two years of depressed oil prices have spread some pain in the NGV sector, particularly with truck fleets, but he doesn't think that a $100/bbl environment is necessary for the transportation use of natural gas to thrive.

"If natural gas stays at $2-$3/MMBtu, but oil is back up to $60 or $70, then we start to have the energy equivalent value differential that drives adoption," Clay told NGI. "Natural gas at $3/MMBtu is an $18 equivalent to a $70/bbl oil price. There, you are at a fraction of the cost, so you can have the real significant fuel price savings that drive change [to NGVs].

"And focusing on the bottom line is the way to get fleets to change the way they fuel their vehicles, especially in the medium-duty fleet sector, where it is a real challenge. We've seen it happen quite successfully in the refuse truck industry, and I think we would have seen much more rapid adoption in the trucking industry had we not had a collapse in oil prices right at the time when the 12-liter NGV engine from Cummins Westport was introduced [see Daily GPI, Oct. 8, 2014]."

Clay said he sees some turning upward in prices and over the long-term, oil is going to be priced at a "significant premium" to natural gas on an energy equivalent basis. Natural gas is cleaner and RNG is "much, much cleaner" than gasoline or diesel, he said.

In the meantime, the push for RNG continues at the national level, and in California there is proposed legislation to try to open up the state’s natural gas grid to commingle RNG, or biomethane, in the infrastructure (see Daily GPI, April 27).

California regulators a few years ago lifted a ban on mixing RNG into the natural gas grid, but the quality and other restrictions placed on the renewable version of natural gas are nearly impossible to meet. Clay and others are backing a proposal to require the California Public Utilities Commission to work with the California Science and Technology Center to look at the quality tariff to assess whether it is "reasonable and/or necessary."

"It would look at whether there are modifications that could be made that would allow for the injection of RNG into the grid here, just like has been done in so many other states and countries for decades," Clay said. "We're kind of re-inventing the wheel here in California, but the important thing is that we are making progress.

"Today, we produce all the product [RNG] outside the state and wheel or nominate it into the state via the interstate pipeline system. It's really no different than the way renewable energy is bought and sold on the electric grid."

West Coast Correspondent | Los Angeles, CARichard Nemec began writing for NGI in 1995 and has 30 years experience in the energy industry. He holds BA from the University of Southern California, Los Angeles; and a MA in journalism from Northwestern University, Evanston, IL; and completed MBA courses at Northwestern's Evening Graduate School of Management.
rich.nemec@naturalgasintel.com

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